Has Iceland Recovered from the Great Recession?

Henry Srebrnik, [Charlottetown, PEI] Guardian
 
On June 25, Gudni Thorlacius Johannesson was elected head of state of Iceland with 39.1 per cent of the vote, defeating three other candidates.

Along with his wife Eliza Reid, who grew up outside of Ottawa, and their four children, he moves into the island nation’s presidential palace this month. Reid met Johannesson when they were both studying history at Oxford University in England.

This remote North Atlantic island nation, whose 332,000 citizens are ethnically virtually homogenous, boasts of being the world’s oldest democracy, its most literate nation, and most successful welfare state. It has a language and a history and a culture entirely its own.

 But the country was hit hard by the Great Recession of 2008, and endured a financial crisis with the collapse of several of the country’s commercial banks in the 2008 Great Recession. Since that time, the political class has been viewed with suspicion.

Until recently, Johannesson had taught history at the University of Iceland and had never held public office. This actually proved a plus earlier this year, when Iceland was roiled by further financial scandals.

Johannesson’s knowledge of the country’s institutions would prove invaluable amid the turmoil of the Panama Papers leak of the more than 11.5 million financial and legal records from the Panamanian law firm Mossack Fonseca, which involved both the incumbent prime minister and president.

The papers, made public in April, detail financial and attorney-client information for more than 214,488 offshore entities, showing the tax-avoidance arrangements of the rich and famous around the world.

In the leaked documents, Icelanders, learned that Prime Minister Sigmundur David Gunnlaugsson was linked to offshore accounts in the British Virgin Islands. The wife of President Olafur Ragnar Grimsson was also named in the leaks.

Gunnlaugsson was accused of a conflict of interest for failing to disclose his involvement in a company that held interests in failed Icelandic banks his government oversees.

Though both men insisted that they had done nothing illegal, and the president denied knowing about his wife’s business affairs, the prime minister resigned in April, replaced by Sigurdur Ingi Johannsson, who had been the agriculture minister, and the president announced in May that he would not be running for a sixth term.

In the ensuing presidential election, Johannesson explained to journalist Adam Gopnik of the New Yorker magazine , “with my expertise in the history of the Presidency, I was able to describe to people what options the President had, and, as it happened, this was at a stage when there was nobody sweeping the electorate behind him or her, and the sort of trickle of support I felt to run turned into a flood.”

As for the economy, the country had made an amazing recovery since 2008, fuelled mainly by the fisheries and by a boom in tourism, whose share of foreign exchange earnings grew from 19 per cent to 28 per cent between 2010 and 2014.

Iceland is not a member of the European Union and Johannesson is opposed to joining it. He asserted that the result of the Brexit vote in Britain to leave the EU is “better for us Icelanders,” implying that the European Economic Area agreement that non-EU members Norway and Iceland have with the EU could play a more important role with the United Kingdom on board.